The State Department inspector general opened a “criminal investigation” of Hillary Clinton aide Huma Abedin in 2013 over allegations of “theft” — referring to overpayments she received and overtime she allegedly wrongfully billed. But the Justice Department declined to take up the issue, documents obtained by POLITICO show.

State’s watchdog in October 2013 escalated a preliminary inquiry regarding Abedin’s compensation to a “criminal” probe, according to a copy of the notice the watchdog gave the FBI.

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“This is to notify you the U.S. Department of State, Office of Inspector General, Washington, D.C., has opened a criminal investigation of the following: Subject: Huma M. Abedin. Title: Former Deputy Chief of Staff for Operations. Office: Office of the Secretary,” reads the notice to the FBI. “The investigation concerns allegations of title 18 U.S.C. 641 Theft.”

But sources close to Abedin, Clinton’s former deputy chief of staff and current vice chairwoman for the campaign, argued that the news actually exonerates Abedin because the Justice Department’s public integrity unit declined to pursue the matter. It’s unclear exactly why Justice didn’t take it up, but it’s now being handled as an administrative claim in which State has asked Abedin to pay back about $10,000 the IG concluded she was over-compensated.

"This is someone who has spent nearly two decades in public service, and is widely known for her integrity and tireless work ethic,” said Clinton campaign spokesman Nick Merrill in a statement for this story. “After the birth of her son, she took maternity leave. The IG had questions about the details of her leave, Huma answered. There is a review ongoing. Anything beyond that is the product of partisan leaks with a clear agenda.”

Senate Judiciary Committee Chairman Chuck Grassley (R-Iowa) had been trying to confirm for weeks that state’s watchdog elevated the disagreement about Abedin’s time and attendance record into its own “criminal” inquiry. An inspector general, however, does not have the power to bring criminal charges against someone — it can only refer it to the Justice Department.

Abedin’s lawyers have acknowledged the $10,000 overpayment issue weeks ago and said they’re fighting it. They maintain that she was actually working during the maternity leave and vacation time, though it doesn’t appear she properly logged the information into the State Department system. But they’ve denied that the overpayment dispute, widely known, ever turned into a criminal investigation.

“There is no criminal investigation and never has been,” said Miguel Rodriguez, an attorney at Bryan Cave, said a month ago in response to questions about a criminal investigation. “To say otherwise is just patently false and needlessly inflammatory.”

But Grassley said those denials don’t square with the IG’s notice, and he penned a Thursday letter to Abedin’s legal team — Rodriguez and Karen Dunn of Boies, Schiller & Flexner — asking them to offer further explanation.

“How can you reconcile your statement with the record?” Grassley wrote.

"As the chairman knows, the Office of Inspector General is not empowered to prosecute criminal allegations,” said Rodriguez when asked about his old quote saying there was no criminal probe. “That is the province of the Department of Justice, which rightly declined to pursue this matter involving the State Department's miscalculation of a new mother's maternity leave and personal leave.”s

Grassley also referenced a fuller tate IG report and its findings on the overpayment issue, a report that has still not been made public.

The Washington Times first reported on the State Department watchdog'sinvestigation of Abedin.

According to Grassley’s description of the state IG’s full report, the watchdog also found that Abedin billed the State Department for more than she was allowed while working as a “special government employee” and exceeded by more than 100 days the limit on the number of days such contractors are permitted to work for the government. Her legal team disputes that she worked that much, however.

During her last months at the State Department, Abedin received special permission to work was a so-called SGE, advising Clinton while receiving a paycheck from the Clinton Foundation and a private-sector consulting firm. Grassley has openly questioned whether this constituted a conflict of interest on her part, though her lawyers have said it does not.

In his Thursday letter, Grassley said the new overpayment information from the IG report calls into question whether she really qualified for an SGE position at all.

“These revelations raise important new questions about whether Ms. Abedin actually qualified for her SGE status under the law and, therefore, whether the normal conflict of interest rules that apply to regular employees should have applied to her as well,” he wrote.

He said that if her status didn’t conform with the rules, then “it would not protect her simultaneous employment with the Department, Teneo, and the Clinton Foundation from complying with the rules that apply to regular federal employees.”

Sources close to Abedin said that’s not true, pointing to an office of government ethics memo that says SGEs who exceed their estimated hours “still will be deemed an SGE for the remainder of that period.”

“This is an attempt to try someone in the court of public opinion with skewed facts, and frankly it's appalling, particularly since we're talking about a staffer,” he said.

And her legal team in the past has taken aim at the state IG’s overpayment report, including its title: “Huma Abedin, Embezzlement.”

“This claim is so unsubstantiated and unsupported that beyond mentioning it as an allegation, the report never mentions it again,” her lawyers wrote in a separate letter to state’s comptroller’s office. “Given that the allegation of embezzlement is baseless on its face, and never even pursued by the OIG, it was irresponsible and unnecessarily provocative for the OIG to label its report in this manner.”

According to Grassley’s description of the IG report, the state watchdog escalated the probe because of “evidence that between 2011 and 2013 Ms. Abedin ‘may have submitted false or inaccurate time records resulting in pay received for work hours which should have been charged to sick and/or annual leave.’”

Abedin between 2011 and 2013 did not change her work status but went on vacation and maternity leave, according to the state IG report. And because she didn’t report the time off, shereceived a lump-sum payment upon leaving state in May 2013 of $33,140.03. The money was for 534 hours of purportedly unused annual leave, according to details laid out in the Grassley letter.

The IG concluded Abedin was overpaid $10,674.32, or 62 days.

Her lawyers have disputed this, saying Abedin was a workaholic who worked during maternity leave and while she was on vacation. Those hours, her lawyers say, were not taken into account when the IG determined she was overpaid, and for that they argue she owes nothing and is fighting the bill.

The IG also found that Cheryl Mills, Clinton’s former chief of staff and longtime legal adviser, signed off on the timesheets. The watchdog’s report, according to the Grassley letter, includes a copy of a February 2012 email, suggesting that Ms. Mills emailed a White House assistant counsel “to discuss the calculation of Ms. Abedin’s leave balance.”

The watchdog also concluded that Abedin worked 244 days as a special employee, exceeding the 130 day limit imposed under federal law. Her lawyer said there was no way she worked that much, but didn't offer a number he thought was more accurate.